With rising costs and reduced funding, will colleges innovate?

Via plizzba on flickr.com Schools such as Northwestern will continue to draw students no matter the cost.Can universities be innovative, or will other entities be created around them to do what higher education refuses to do?
That topic was raised today at my Hechinger Institute conference as we looked at the effect shrinking public support is having on schools.
One reporter asked if losing state cash but gaining students will force colleges to look for new ways to teach that are less expensive.
Molly Corbett Broad of the American Council on Education said many university leaders don’t see it that way.
“High-risk innovation in a public institution is a career-ending opportunity,” she said.
Dennis Jones of the National Center for Higher Education Management Systems said many in charge look at tough times and try to keep afloat without rocking the boat. He said most of the real changes in higher education have come from outside.
One example, he said, was the advent of community colleges after World War II and the baby boom, when the traditional institutions were not interested in taking on the new students.
“I see institutions hunkering down and not changing much,” he said. “I see little real change happening in traditional higher ed. Changes will be in the higher education industry, but not to individual institutions.”
He said such industry changes are happening now, pointing to the session Friday with Western Governors University, and Burck Smith’s StraighterLine programs, which offer classes common to the first two years of college in almost every college at a fraction of the price.
Smith said those 101 classes are not expensive to teach, probably around $100 a student. But universities charge thousands of dollars, largely to subsidize the more expensive graduate classes and research.
The challenge for Straighterline is to get universities to accept his students’ credits as they transfer. Such schools are considered by many colleges to be a threat.
The theory is that the prestige programs, like Northwestern and University of Michigan, are going to get students no matter what, including a good number who won’t need financial aid. They don’t need to make big changes, and actually risk hurting their brand if things go wrong.
But many of the others don’t have that luxury.
Smith pointed to Virginia Tech’s new Math Emporium, which is in a building like a closed Kmart filled with computers for students to take lower-level classes surrounded by teachers and tutors.
What stuck me was that it was another reference to online courses, which seem like a growing trend based on the first two days of the conference.